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The U.S. government fears Alpha Natural Resources Inc.'s proposal to sell its "crown jewel assets" to its lenders won't provide for cleaning up pollution at Alpha's mines, posing a "serious threat to public health and safety,“ Dow Jones Daily Bankruptcy Review reported today. The coal miner's plan to sell key assets to its lenders, whose $500 million bid Alpha wants to test through an auction process, has drawn some two dozen bankruptcy-court filings from creditors raising various concerns with the proposal or objecting outright. Among them is the federal government. The lenders' credit bid---that is, not hard cash but rather a pledge to forgive $500 million in debt they are owed---puts Alpha at risk of becoming unable to comply with its obligations to reclaim the land and treat the water at its mines, the government said.

The U.S. Chamber of Commerce released a study on Friday that found inconsistencies in claims made to the asbestos trusts used to compensate people harmed from exposure to asbestos, The Hill reported today. The chamber’s Institute for Legal Reform (ILR) said that it analyzed information from 100 randomly selected personal information questionnaires submitted by asbestos plaintiffs in the bankruptcy proceedings of Garlock Sealing Technologies, Inc. and found that 69 percent of victims making claims failed to list every place they’ve been employed, making it impossible for the trusts to verify job site information. The chamber’s study also found that 15 percent of claimants failed to list the specific products from which they were allegedly exposed; 55 percent had date discrepancies and 21 percent of claims contained other troubling inconsistencies, such as differing medical diagnoses, conflicting job descriptions and implausible exposure allegations. Read more.

To read more about litigation or liquidation trusts in bankruptcy, be sure to pick up a copy of ABI’s A Practitioner's Guide to Liquidation and Litigation Trusts.

Gov. Jerry Brown (D) on Wednesday called on the state to spend $176.6 million to speed up the testing and cleanup of potentially thousands of lead-contaminated homes surrounding a shuttered battery recycling plant in Vernon, Calif., the Los Angeles Times reported today. The move would mark a significant boost to a massive effort to test and clean homes, schools, day-care centers and parks around the Exide Technologies facility that is expected to cost hundreds of millions of dollars. Residents in the working-class Latino communities around the plant have complained for years about the pollution and criticized government agencies as slow to deal with the problem. The funds, which the state would seek to recover from Exide, would be paid over the next year to test 10,000 homes within 1.7 miles of the closed plant and to remove lead from about 2,500 homes where levels pose the greatest risk of poisoning, said Barbara Lee, director of the Department of Toxic Substances Control. The $176-million amount, which would require approval from the Legislature, was based on the department's estimate that 20-25 percent of homes in the area may have lead levels high enough to be given highest priority for cleanup.

While Peabody Energy Corp. has spent months negotiating its debt with lenders, another $1.47 billion problem has surfaced that’s threatening to force the nation’s biggest coal miner down the same road as its bankrupt rivals: a practice called “self-bonding,” Bloomberg News reported today. Peabody is under attack by groups who’ve lodged complaints about the practice in five states in the past week. For decades, Peabody and other coal producers deemed to have strong balance sheets have saved cash under this privilege that excuses them from having to post collateral or obtain surety bonds that cover future mine clean-up costs. Peabody self-bonds in five states including Wyoming. As Peabody’s finances deteriorate amid a historic coal rout, calls are mounting from environmentalists, lawyers and federal officials for Wyoming and other states to crack down on the practice of self-bonding. It’s a push that may force coal miners to post billions of dollars for future cleanup costs just as they’re struggling to protect their share of the U.S. power market from cheap natural gas.

Bankruptcy Judge Stuart Bernstein ruled yesterday that victims of Bernard Madoff's fraud cannot pursue a Florida lawsuit to recover $11 billion from the estate of Jeffry Picower, who they say helped perpetuate the swindler's Ponzi scheme, Reuters reported. Judge Bernstein said that the lawsuit by A&G Goldman Partnership and Pamela Goldman, their third effort to sue in Florida, violated an injunction barring Madoff victims from pursuing claims belonging to Irving Picard, the trustee liquidating Bernard L. Madoff Investment Securities LLC. Picard had in December 2010 won a $7.2 billion settlement with the estate of Picower, who died in October 2009. But a slew of litigation ensued from Madoff customers, including many who say the trustee undervalued their claims, against Picower and other alleged enablers of Madoff. Picard has estimated that Madoff's victims lost $17.5 billion in the fraud, which was uncovered in December 2008. Read more.

For a further analysis of commercial fraud, make sure to pick up a copy of ABI’s Fraud and Forensics: Piercing Through the Deception in a Commercial Fraud Case. 

The Diocese of Duluth, Minn., and attorneys representing child sexual abuse victims have agreed to enter mediation for victim claims, WDIO.com reported yesterday. The Diocese of Duluth filed for bankruptcy in December, saying that the move will allow them to protect assets and pay out what is due to victims. However, Judge Robert Kressel encouraged the Diocese and all parties involved to work with a mediator. Bankruptcy Judge Gregg Zive, who has experience in diocesan bankruptcy cases, is expected to be approved as mediator by Judge Kressel.

Bankrupt coal miner Arch Coal Inc. has reached a deal with the state of Wyoming that will provide it with temporary relief from liability for millions of dollars in future cleanup costs for coal mines, Reuters reported yesterday. In the past, companies like Arch Coal have covered the costs of cleaning up mines through self-bonds that allowed them to use their balance sheet as a guarantee. That practice has come under federal scrutiny since Arch Coal, the second-largest U.S. coal miner, and Alpha Natural Resources filed for bankruptcy, potentially leaving taxpayers exposed to billions of dollars in cleanup costs. Arch said in a court filing that the state of Wyoming and the Wyoming Department of Environmental Quality have agreed to accept $75 million from a debtor-in-possession financing carve-out in the bankruptcy. That amount will cover cleanup costs related to mines operated by Arch, including Black Thunder, one of the country's largest mines, as well as the Coal Creek and Vanguard mines. An additional $17 million will be provided in third-party collateral for four smaller mines, it said.

A bankrupt chemical company dubbed responsible for a spill that contaminated a West Virginia river and fouled the drinking water supply of 300,000 residents has been sentenced to the maximum possible penalty on pollution charges, the Associated Press reported yesterday. But a federal judge in Charleston said yesterday that the sentence of a $900,000 fine and five years' probation for Freedom Industries was symbolic and likely would never be paid. Freedom filed for bankruptcy eight days after the January 2014 spill. A federal bankruptcy judge approved a liquidation plan in October. At a separate hearing Thursday, former plant manager Michael Burdette became the third Freedom official to be fined and sentenced to probation. The spill of a coal-cleaning agent into the Elk River prompted a tap-water ban in nine counties for up to 10 days.

The U.S. Senate Judiciary Committee discussed the Furthering Asbestos Claims Transparency (FACT) Act at a hearing yesterday titled “The Need for Transparency in the Asbestos Trusts,” Asbestos.com reported. The bill would require new, stiffer requirements for those seeking compensation from asbestos trusts. The Code established asbestos trusts to compensate victims of asbestos exposure. These trusts are worth an estimated $30 billion. Earlier this year, the FACT Act was folded into a larger proposal and renamed the Fairness in Class Action Litigation and Furthering Asbestos Claim Transparency Act of 2016 (H.R. 1927). The U.S. House of Representatives recently passed that version. Click here to watch a replay of the hearing and to obtain prepared witness testimony. 

For further analysis of litigation trusts, be sure to pick up a copy of ABI’s A Practitioner's Guide to Liquidation and Litigation Trusts.

Attorneys told a judge yesterday that progress in settling the 26-month-old Diocese of Gallup (N.M.) bankruptcy case has stumbled because an insurer is unwilling to provide detailed financial information demanded by a representative for future sex abuse claims against the diocese, the Albuquerque Journal reported today. An attorney for Catholic Mutual Relief Society of America, a church-owned nonprofit that insures the diocese, said that the dispute may lead Catholic Mutual to withdraw its offer to pay future claims against the diocese. Attorneys described the future claims fund as a crucial part of the settlement. The Diocese of Gallup in 2013 became the ninth Roman Catholic diocese in the U.S. to file for chapter 11 protection in response to lawsuits alleging sexual abuse of children by clergy. Mediation talks in December led to a tentative agreement on funding a settlement, but unresolved details include setting up a trust fund to pay for future claims.